CONSUMER COALITION AND RESIDENTS SPEAK OUT AGAINST AUTO INSURANCE DISCRIMINATION

Groups Go to Oakland Intersection Where Premiums Increase $427 For Good Drivers Living on the “Wrong” Side of Oakland ZIP Code Boundary

OAKLAND, CA – Millions of Californians pay higher auto insurance premiums because of the neighborhood they live in even though they have good driving records and despite the fact that Proposition 103 banned premiums based primarily on ZIP code. That is because state regulations enacted by former Insurance Commissioner Chuck Quackenbush allow insurers to base their auto premiums mostly on a policyholder’s ZIP code – and even gender and marital status – instead of their driving record.

That could change if the California Department of Insurance adopts a proposal by community and consumer groups and the cities of Oakland, Los Angeles and San Francisco to require auto insurers to base their rates primarily on how a policyholder drives, not where they live.

“Basing auto premiums primarily on where a driver lives is unfair to all Californians, but it has a particularly negative impact on the poor and communities of color,” said Oakland City Attorney John Russo. “This discriminatory practice is making it harder for California’s working families to afford the insurance coverage they are required by law to maintain.”

To dramatize the unfair disparity that results when auto insurance premiums are based primarily on ZIP code, the coalition held a news conference today along Broadway at 41st Street in Oakland, the border between the 94609 and 94611 ZIP codes. One leading insurer charges an annual premium of $1,442.50 for standard coverage for a female driver living on the 94611 side of the street who has 22 years of driving experience with no violations. If this same driver moved across the street into the 94609 ZIP code, she would pay $1,870.22 – about $427, or 30 percent, more.

Even larger disparities exist between ZIP codes that are close but not side by side. For example, a young man with two years driving experience living in the wealthy Montclair district of Oakland would be charged $4,212 for basic liability coverage, while the same driver living in the predominantly Latino Fruitvale district would be charged a $5,526 annual premium – over $1,300 more. A male driver living in Walnut Creek with five years of driving experience and no traffic violations would pay, on average, $928.80 for basic liability coverage. But if he lived in the more working class community of Richmond, he would pay almost $300 more or $1,216.50. The same driver would pay, on average, $1,406.12 in San Francisco, compared to $927.86 for identical basic liability coverage if he lived in the community of San Mateo.

“Allowing insurance companies to base their auto premiums primarily on ZIP codes has made insurance coverage unaffordable for many low income drivers,” said Mark Savage, Senior Attorney for Consumers Union. “That’s unfair and it hurts all of us because it means there are more uninsured and underinsured drivers on the road. And those of us with insurance end up paying a higher ‘uninsured motorist’ premium as a result.”

The coalition filed a petition with Insurance Commissioner John Garamendi last May calling on him to require auto insurers to base their premiums primarily on the three mandatory factors spelled out in the voter-approved Proposition 103 – driving safety record, miles driven, and years of driving experience. The petition seeks to strike down a regulation adopted by former Insurance Commissioner Chuck Quackenbush in 1996 that has allowed insurers to circumvent Proposition 103 by giving far more weight to a driver’s ZIP code and other criteria.

“Insurance companies used their influence over Quackenbush to subvert the will of the voters who enacted Proposition 103 fifteen years ago,” said Harvey Rosenfeld, author of Proposition 103. “The voters are looking to Insurance Commissioner Garamendi to correct this injustice so that drivers who have a good safety record don¹t end up paying higher premiums because of the neighborhood they live in.”

Passed by voters in 1988, Proposition 103 allowed the Insurance Commissioner to adopt regulations authorizing the use of optional rating factors for determining insurance premiums. However, the weight or importance of any optional factor an insurers use, such as ZIP code, gender or marital status, must be less than the weight of each mandatory factor in determining auto premiums.

“Californians shouldn’t be penalized with higher auto insurance rates just because of their ZIP code,” said San Francisco City Attorney Dennis Herrera. “We thank Commissioner Garamendi for reviewing this important issue, and we urge the Department of Insurance to adopt new regulations in order to stop ‘postal profiling’ by the auto insurers.”

State Insurance Commissioner John Garamendi will hold the first in a series of statewide town hall meetings on the proposal in Oakland on December 4, at 6pm at the Elihu Harris State Building at 1515 Clay Street, near City Hall. Other town hall meeting are scheduled in January 2004 in Van Nuys, Los Angeles, Buena Park and San Diego.